Daily market review

United States

Strength in tech leaders Apple and Microsoft lifted US equities indexes, despite mixed corporate news Friday. Markets took favorable note of plans for some US states to ease lockdown restrictions. The Dow industrials rose 1.1 percent, the S&P 500 gained 1.4 percent, and the NASDAQ was up 1.7 percent.

Among sectors, outperformers included railroads, tobacco, homebuilders, tech, autos and retail. Lagging were oil exploration & production, airlines, real estate, machinery, and entertainment. Market leaders Apple, up 2.9 percent, and Microsoft, up 1.8 percent, rose amid favorable expectations for earnings next week.

Among other companies in the news, Google firmed 0.4 percent after saying it would cut costs including slashing its marketing budget by half, a remarkable turnabout for the growth juggernaut. Intel also managed to recover from initial losses to end up 0.4 percent after it reported strong quarterly results but disappointing guidance. American Express rose 0.9 percent after topping earnings expectations but boosting its credit provision.

Boeing dropped 6.4 percent after reports it will announce job cuts and slash aircraft output in response to falling demand. Beleaguered retailer JC Penney fell 11 percent after reports it was close to bankruptcy.

In US economic data, civilian aircraft pulled durable goods orders down 14.4 percent in March from February. Orders for nondefense aircraft fell in March, at minus $16.3 billion, in what may be the trend given low travel and the failure of the Boeing 737. In a separate report, consumer sentiment actually improved slightly since the preliminary reading on April 9th. April's final at 71.8 tops Econoday's consensus range though it was 17.3 points below March. The April decline in expectations, at nearly 10 points to 70.1, is much less severe than the nearly 30-point plunge in current conditions to 74.3.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose by 26 cents to US$21.84, while spot gold fell US$3.52 to US$1,727.98. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield fell 2 basis points 1.17 percent while the 10-year note yield fell 2 basis points to 0.59 percent.


Bleak economic data and an underwhelming package of EU stimulus measures depressed equities Friday. The Europe-wide STOXX 600 fell 1.1 percent, the German DAX lost 1.7 percent, the French CAC was off 1.3 percent, and the UK FTSE-100 also fell 1.3 percent.

Risk assets reacted poorly to news that European Union leaders had agreed to a relatively modest 500 billion euro aid package while leaving details of an anticipated larger package for later discussion. Markets expect the ECB to expand its asset purchase program in the absence of fiscal policy action. Weak economic data, including a record drop in UK retail sales and an unprecedented plunge in German business sentiment added to the market's grasp of the scale of damage from the coronavirus and associated lockdowns.

Among sectors, declines were across the board with weakest performers in travel & leisure, banking, media, and oil & gas, autos, and industrials, while holding up relatively well were health care, real estate, utilities, food & beverage, telecom, retail, and construction.

On a busy earnings day, Swiss food conglomerate Nestle rose 2 percent after reporting strong sales growth and affirming its guidance, as it said the coronavirus impact is unknowable. Sanofi, the French pharma, rose 2 percent after an earnings beat reflecting consumers stocking up on drugs as the virus epidemic took hold. Among decliners, Lufthansa fell 7 percent after analyst downgrades after the airline spelled out its new business plan and cost cuts.

In economic data, UK retail sales nosedived in March. Following an unrevised 0.3 percent monthly fall in February, volumes slumped fully 5.1 percent, their steepest drop on record as many stores stopped trading from the third week of the month due to the coronavirus crisis. Meanwhile, Ifo's latest survey found German business sentiment deteriorating dramatically further and hitting a new series low this month. At just 74.3, the headline index dropped a record 11.6.

Asia Pacific

Most major Asian markets closed lower Friday, extending losses on the week. Economic data published Friday were generally weak, while investor sentiment was hurt by news overnight that Chinese drug trials of a potential treatment for coronavirus had not proved successful. Shanghai Composite index closed down 1.1 percent on both the day and the week, while Hong Kong's Hang Seng index fell 0.6 percent on the day and 2.3 percent on the week. Japan's Nikkei and Topix indices fell 0.9 percent and 0.3 percent on the day respectively, and dropped 3.2 percent and 1.5 percent on the week respectively. Australia's All Ordinaries index outperformed on the day with an increase of 0.5 percent but was one of the weaker regional performers on the week, closing down 4.4 percent.

Japanese inflation data showed price pressures were generally steady in March. The headline consumer price index rose 0.4 percent on the year in March, unchanged from the rate recorded in February, while the Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, advanced 0.6 percent on the year in March, also unchanged from February. BoJ officials in recent months have committed to keep policy rates at or below current levels until they are confident that there will not be a loss of "momentum" towards meeting their 2.0 percent inflation target. These data suggest that progress toward the inflation target remains slow and likely reinforces the case for keeping monetary policy accommodative. Also published Friday, Japan's all industry index fell 0.6 percent on the month in February, weakening sharply from an increase of 0.6 percent in January, and broadly in line with previously published indicators showing the adverse initial impact of the global coronavirus pandemic on Japan's economy in February.

Singapore industrial production data showed a strong rebound in output in March, though this was largely driven by the volatile pharmaceuticals industry. Industrial output rose 16.5 percent on the year in March, up sharply from a revised decline of 0.7 percent in February, and rose 21.7 percent on the month after falling a revised 22.1 percent previously. Output in the biochemical industry, which represents around 18 percent of the manufacturing sector and includes pharmaceuticals, surged in March, up 91.4 percent on the year after growth of 6.7 percent in February. Conditions elsewhere in the sector, however, were weak. Officials note that the impact of the global coronavirus pandemic will likely weigh on industrial production significantly in coming months, reflecting both weaker external demand and restrictions on domestic businesses.

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